Speaker 1: Get in touch with technology with tech Stuff from how
Speaker 1: Stuff Works dot com. Hey there, and welcome to tech Stuff.
Speaker 1: I'm your host, Jonathan Strickland. I'm an executive producer with
Speaker 1: How Stuff Works, and I heart radio and I love
Speaker 1: all things tech. And in our last episode, I traced
Speaker 1: how A o L became a dominant player in the
Speaker 1: dial up online service provider business, leading to the incredibly
Speaker 1: ambitious merger with Time Warner to form a o L.
Speaker 1: Time Warner and I talked about how the dot com
Speaker 1: crash and the rise of broadband dealt a double whammy
Speaker 1: of a blow to the brand new company, making the
Speaker 1: merger look like it was premature and wildly too expensive
Speaker 1: of a move for both companies, and I ended mentioning
Speaker 1: that Steve Case, the last remaining founder of A o L,
Speaker 1: stepped down from the board of directors in two thousand five.
Speaker 1: But not every ing was dark and dismal for A
Speaker 1: o L. In two thousand five, the company was being
Speaker 1: eyed with interest by some other big names in the
Speaker 1: text sphere. There were stories that both Microsoft and Google
Speaker 1: were looking at A o L as a possible acquisition
Speaker 1: if they could convince the merged company to break up. Again,
Speaker 1: A O L had repositioned itself with a bit of
Speaker 1: a renaissance. At the end of two thousand four, many
Speaker 1: people were still using lots of A O L's services,
Speaker 1: including A O L Instant Messenger and map Quest, which
Speaker 1: the company owned. The A O L dot Com website
Speaker 1: offered up the content that previously only A O L
Speaker 1: subscribers had been able to access, and it was all free. Well,
Speaker 1: I mean, it was his ads supported, but you get
Speaker 1: what I mean. However, al L was still making some
Speaker 1: really big business moves while things were looking uncertain, and
Speaker 1: that just made people kind of wonder what was going on.
Speaker 1: In two thousand four, the company had agreed to acquire
Speaker 1: a startup called Advertising dot Com, Inc. And I'm pretty
Speaker 1: sure you can guess what business that company was in
Speaker 1: the division We get a rebranding in two thousand thirteen
Speaker 1: as A O L Networks, partly to send the message
Speaker 1: that services could span across different types of screens, not
Speaker 1: just computers, but televisions and phones and other devices. But
Speaker 1: executives over at the time Warner side of this company
Speaker 1: weren't really head over heels in love with A O L.
Speaker 1: Before the merger, A O l's value was estimated to
Speaker 1: be somewhere in the two billion dollar range. Yikes. After
Speaker 1: the dot com crash, however, that value dropped to five
Speaker 1: billion according to some accounts, although honestly most accounts say
Speaker 1: the value was closer to twenty billion. But whether it's
Speaker 1: five or twenty, both of which are enormous numbers, get
Speaker 1: don't get me wrong. Billion is a lot. That's such
Speaker 1: a huge drop from two hundred billion. By two thousand five,
Speaker 1: the number, according to some sources, had climbed a little bit.
Speaker 1: It was moving in the right direction, but still a
Speaker 1: fraction of what A O L had been prior to
Speaker 1: the merger. At the time of the merger, AOL had
Speaker 1: the higher market capitalization between the two companies, but Time
Speaker 1: Warner was making way more revenue. So you can look
Speaker 1: at this as indicative of the whole dot com problem.
Speaker 1: In the first place, you had these internet based companies
Speaker 1: that were valued much, much greater than what they could
Speaker 1: actually pay off in the They their value was greater
Speaker 1: than their worth, and that was really the issue that
Speaker 1: led to the dot com bubble bursting in the first place.
Speaker 1: The culture clash never settled down between the two companies.
Speaker 1: They weren't able to find a good equilibrium. The AOL
Speaker 1: executives felt their traditional media counterparts just didn't get how
Speaker 1: business on the inner that worked. They were probably right,
Speaker 1: but the Time Warner executives saw A O L as
Speaker 1: wasteful and filled to the brim with hubris. A company
Speaker 1: just was convinced that the way it did things was
Speaker 1: the right way, and that it was building a business
Speaker 1: on a product that was clearly on the way out,
Speaker 1: that being dial up service, and the Time Warner executives
Speaker 1: were kind of right. No one was wholly in the
Speaker 1: wrong here, other than the fact that this partnership was
Speaker 1: wholly in the wrong. In fact, by two thousand three,
Speaker 1: just a few years after this merger, A O L.
Speaker 1: Time Warner began to drop the A O L part
Speaker 1: from its name came to just call itself Time Warner again.
Speaker 1: Keep in mind, all L was the company that technically
Speaker 1: made the acquisition. It's technically the company that bought Time Warner,
Speaker 1: but now the collective entity was casually ignoring the online
Speaker 1: part of its identity. In two thousand five, A O
Speaker 1: L and tell A Pictures Productions, a division from Warner Brothers,
Speaker 1: would create TMZ and If you're not aware of what
Speaker 1: that is, consider yourself fortunate. It's a tabloid news website
Speaker 1: that's mainly focused on following celebrities around and publishing everything
Speaker 1: it can about those celebrities. It has been one of
Speaker 1: the more successful properties to come out of the A
Speaker 1: O L and Time Warner days. So I'm pretty snarky
Speaker 1: about the whole thing. I don't really like TMZ and
Speaker 1: the way they do business. However, I cannot deny that
Speaker 1: it's been a money maker. It has been very successful,
Speaker 1: whether I like it or not. So I mean, you know,
Speaker 1: they they're the ones who became really rich on it,
Speaker 1: So what do I know. In two thousand and six,
Speaker 1: America Online officially changed its name to A O L.
Speaker 1: CEO John Miller said that the reason for this change
Speaker 1: was that getting America Online would That had been the
Speaker 1: old mission of the company, to get America online, so
Speaker 1: that's why it called itself America Online. But he said,
Speaker 1: the company did that. We've done that already. We achieved
Speaker 1: our goal. So this new name indicates the quote expanded
Speaker 1: mission to make everyone's online experience better end quote. A
Speaker 1: O L had also changed in another way. It changed
Speaker 1: from A corporation into a limited liability company. Now they
Speaker 1: get into the differences between an LLC and a corporation
Speaker 1: in the United States is more than a little beyond
Speaker 1: the scope of tech stuff, but it mostly has to
Speaker 1: do with how profits and losses are handled, and it
Speaker 1: also has to do a lot with how a company
Speaker 1: is taxed. So we're not gonna dive into all that.
Speaker 1: I'm sure most of you don't really care, and honestly,
Speaker 1: it gets pretty dull pretty fast. But the following year,
Speaker 1: AOL made another big change. It moved its headquarters, which
Speaker 1: had been in Dulles, Virginia ever since the founding of
Speaker 1: the company. Now it was going to move to New
Speaker 1: York City. It also laid off about two thousand employees,
Speaker 1: or about of its entire workforce. This move was largely
Speaker 1: to refocus a o L on its advertising business as
Speaker 1: the dial up side continued to dwindle, though it was
Speaker 1: still generating revenue at that point. This was two thousand seven,
Speaker 1: and and just for reference, two thousand seven was also
Speaker 1: when Apple introduced the iPhone. So the iPhone comes out,
Speaker 1: people are still using dial up modems enough for a
Speaker 1: o L's division to be profitable that's not the last
Speaker 1: time we'll talk about dial up though. Anyway. A o
Speaker 1: l's new headquarters were closer to Time Warner's HQ, and
Speaker 1: it was also much closer to the advertising world in general.
Speaker 1: The advertising world in the United States is almost entirely
Speaker 1: based out of New York City, so this was putting
Speaker 1: a o L close to where the advertising businesses thrived.
Speaker 1: AOL also would change CEO s Jonathan Miller, who had
Speaker 1: been leading the company up to that point, was replaced
Speaker 1: by a guy named Randy Falco. A o L made
Speaker 1: some acquisitions, many of which did not turn out so well. So.
Speaker 1: For example, in two thousand eight, a o L acquired
Speaker 1: a social networking site called Bibo. It's not that well
Speaker 1: known in the United States, but it was the second
Speaker 1: largest social network in the UK after Facebook. Back in
Speaker 1: two thousand and eight. Bibo could boast twenty two million
Speaker 1: unique visitors and they spent an average time of forty
Speaker 1: minutes a day on the service, which sounds like a
Speaker 1: pretty attractive bargain. You can go to an advertiser and say,
Speaker 1: I can guarantee you that millions of people are going
Speaker 1: to look at this for forty minutes every day, and
Speaker 1: you're gonna be able to sell a lot of ads.
Speaker 1: So A O L would spend eight hundred fifty million
Speaker 1: dollars in cash on this acquisition. So how did it
Speaker 1: turn out? Not great at all? Now, you could argue
Speaker 1: that Bibo was on the same path of decline that
Speaker 1: A O L was as a As broadband was becoming
Speaker 1: more popular, A Well's dial up was dwindling. Well, Bibo
Speaker 1: was seeing its number of users dwindle. A lot of
Speaker 1: them were going to other social networking sites like Facebook.
Speaker 1: A O L was not able to capitalize on Bibo
Speaker 1: like executives had hoped, So just two years after buying
Speaker 1: the company, A o L would sell it to a
Speaker 1: digital media investor group called Criterion Capital Partners, and the
Speaker 1: price was much lower than the eight hundred fifty million
Speaker 1: dollars that A o L had paid for it. They
Speaker 1: sold it for ten million. Three years after that, the
Speaker 1: original founders of Bibo were able to buy back their
Speaker 1: company from this investor group for just one million dollars.
Speaker 1: So they sold it for a D fifty million and
Speaker 1: then they bought it back for one million. Now that's
Speaker 1: all a bit outside the scope of A O L.
Speaker 1: But I thought it was an interesting little tidbit, so
Speaker 1: I decided to include. Plus it's another way to illustrate
Speaker 1: how A o L was still making some pretty questionable choices.
Speaker 1: That the merger with Time Warner wasn't an outlier. I
Speaker 1: mean it was an outlier in the sense of how
Speaker 1: big it was. A hundred sixty billion dollars is an
Speaker 1: enormous outlier, but not an outlier in the sense of
Speaker 1: making some rash decisions that ultimately didn't pay off. Now
Speaker 1: that's also not to say that every purchase A o
Speaker 1: L made was inherently bad. A o L bought lots
Speaker 1: of companies, dozens of them. In fact, companies like Weblogs Inc.
Speaker 1: That owns popular sites like Engadget and the former Joystick.
Speaker 1: There was Game Daily that A o L purchased True Vio.
Speaker 1: All of those made products or services that faced the public.
Speaker 1: A well also bought companies like e Voice, Info Interactive,
Speaker 1: and ad Tech. Those were more business oriented ventures, so
Speaker 1: not necessarily things that you and I would encounter, but
Speaker 1: other enterprises would. And A o L was never afraid
Speaker 1: of buying other companies in an effort to remain relevant
Speaker 1: or regain relevance, depending upon your point of view, but
Speaker 1: things between A O L and Time Warner would get
Speaker 1: less stable by the year. The cultures of the two
Speaker 1: companies still had not found a good meeting point. In
Speaker 1: March two thousand nine, the company replaced CEO Randy Falco.
Speaker 1: The new leader for the A O L branch would
Speaker 1: be Tim Armstrong. Armstrong was coming from Google, where he
Speaker 1: had helped build the company's advertising division into a juggernaut.
Speaker 1: At the time, various industry journals reported that Armstrong had
Speaker 1: had aspirations of being a CEO of a company, He
Speaker 1: just hadn't quite settled on which company he wanted to
Speaker 1: go for. According to add Age, his name was one
Speaker 1: of the ones that Yahoo was considering when it was
Speaker 1: searching for a replacement for their CEO and founder Jerry Yang.
Speaker 1: But A O L would end up being his destination.
Speaker 1: And that was just the beginning for the big events
Speaker 1: of two thousand nine. I'll explain more in just a second,
Speaker 1: but first let's take a quick break to thank our sponsor.
Speaker 1: In May two thousand nine, just two months after Tim
Speaker 1: Armstrong took the helm of A O L. The tumultuous
Speaker 1: pairing of A O L and Time Warner began the
Speaker 1: slow march to divorce. Time Warner said it would spin
Speaker 1: off A O L as an independent company later that year.
Speaker 1: In December of two thousand nine, A O L shares
Speaker 1: would begin trading on the floor of the New York
Speaker 1: Stock Exchange. Time Warner executives said the reason for the
Speaker 1: split was that A O L was more likely to
Speaker 1: grow as a separate company than as part of Time Warner,
Speaker 1: and that A O L attracted different investors than Time
Speaker 1: Warner did. Time Warner would become a more lean and
Speaker 1: straightforward company as well, according to the wisdom of the time,
Speaker 1: and this was largely true. Time Warner, by the way,
Speaker 1: and I'll again have to do a full episode about
Speaker 1: this whole thing at some point. They would later spend
Speaker 1: off Time Incorporated in two thousand fourteen, and in two
Speaker 1: thousand eighteen, A T and T would move to acquire
Speaker 1: Time Warner, which is now called Warner Media LLC. By
Speaker 1: the time this episode airs, that should be finalized. But
Speaker 1: as I'm recording this, there's currently an appeal out on
Speaker 1: an earlier court ruling that permitted the mergers. So you
Speaker 1: had one court say yeah, that mergers fine, and A T.
Speaker 1: And T and Time Warner were ready to make it
Speaker 1: a real deal, but then you had an appeal go out,
Speaker 1: and that appeal is still being decided as of the
Speaker 1: time I'm recording this episode. Between the announcement and the
Speaker 1: actual spinoff date, A O L would acquire another company
Speaker 1: called Patch Media, and Patch Media oversaw community news websites
Speaker 1: so reach local community news. It was also a company
Speaker 1: that was co founded by Tim Armstrong, the leader of
Speaker 1: A O L. A L would end up investing another
Speaker 1: fifty million dollars in Patch in but in the company
Speaker 1: announced it would be reducing the number of Patch sites
Speaker 1: from nine hundred to six hundred, and also the company
Speaker 1: would be laying off staff at all levels of the organization.
Speaker 1: Armstrong also famously publicly fired Patches creative director over a
Speaker 1: conference call on which all Patch employees were participating. Armstrong
Speaker 1: would later apologize for this breach in etiquette. A O
Speaker 1: L would spend off Patch and sell off its ownership.
Speaker 1: In two thousand fourteen, in A O L purchased tech Crunch,
Speaker 1: a tech news site that was founded back in two
Speaker 1: thousand five. Tech Crunch is still part of the overall
Speaker 1: company that we'll get into how that company has changed
Speaker 1: in just a little bit. Also in a o L
Speaker 1: bought a young web hosting service called about dot me,
Speaker 1: which had launched in October two thousand nine, so it
Speaker 1: wasn't even a full year old when a o L
Speaker 1: bought it. About dot Me is meant as a sort
Speaker 1: of centralized personal web page, and it's meant to coordinate
Speaker 1: all the various online points of contact a person might
Speaker 1: have in one place. So there are various social media accounts,
Speaker 1: email addresses, websites, all that kind of stuff. And that way,
Speaker 1: if you went to about dot me and you searched
Speaker 1: for me, presumably you would find links to all the
Speaker 1: different ways that I have an online presence, and I
Speaker 1: can cultivate that, I can decide which ones they share
Speaker 1: and which ones they don't, and like Bibo, this acquisition
Speaker 1: ended up not being a great fit. Tony Conrad, who
Speaker 1: was one of the co founders of about dot me,
Speaker 1: was able to buy back majority ownership of the site
Speaker 1: from A o L in two thousand thirteen, and it
Speaker 1: had been two years and a month since a o
Speaker 1: L had bought the company. The detail else of the
Speaker 1: two business transactions how much A o L paid for
Speaker 1: it and how much Conrad had to pay to get
Speaker 1: it back were never made public, but Conrad did tell
Speaker 1: The New York Times that he paid a fraction of
Speaker 1: what A O L had paid for the company back in.
Speaker 1: So once again, a O L buys a company and
Speaker 1: then sells it off at a fraction of what it
Speaker 1: paid for it once it realizes this wasn't a good
Speaker 1: fit after all. It seems to be a pretty common theme.
Speaker 1: In two thousand eleven, A O L made another big
Speaker 1: media acquisition when it bought The Huffington Post for about
Speaker 1: three hundred fifteen million dollars. Arianna Huffington's, the founder of
Speaker 1: the Huffington's Post, was named a O L Content Chief,
Speaker 1: and she held that position until two thousand sixteen, when
Speaker 1: she would step down from A O L to concentrate
Speaker 1: on a new startup called Thrive Global. The Huffington's Post
Speaker 1: acquisition was in February two thousand eleven. In April two
Speaker 1: thousand eleven, A O L would cut nine hundred staff
Speaker 1: from The Huffington's Post. Now that included two hundred jobs
Speaker 1: in the United States and seven hundred jobs in India.
Speaker 1: Tim Armstrong told reporters that the company's goal was to
Speaker 1: move toward having s of a o L staff working
Speaker 1: in editorial or other content divisions like tech Crunch. The
Speaker 1: Huffington Post is still part of the overall company. Armstrong
Speaker 1: was guiding a o L to focus more on creating
Speaker 1: content and then advertising against that content, and it was
Speaker 1: working as recently as Internet subscriptions made up of a
Speaker 1: o L's revenue, but with Armstrong's changes, that was shifting
Speaker 1: more toward revenue from advertising, which is good because again
Speaker 1: the dial up service was not going to increase year
Speaker 1: over year. In two thousand thirteen, the company posted its
Speaker 1: first revenue gains year over year since two thousand five,
Speaker 1: them in the company was finally growing again from revenue.
Speaker 1: The company continued its course by acquiring a video ad
Speaker 1: company called adapt dot tv for four hundred five million dollars.
Speaker 1: It actually was able to pull market share away from
Speaker 1: Google this way, and in a o L would post
Speaker 1: a one six million dollar profit. Also in al began
Speaker 1: to face pressure from investors to make another really big move.
Speaker 1: The pressure came from an American hedge fund called Starboard Value.
Speaker 1: The organization owns shares and numerous companies, including A two
Speaker 1: point four percent ownership of a O L. And it
Speaker 1: was using its stake to influence how those companies are run,
Speaker 1: which is something shareholders do all the time. You can
Speaker 1: vote because of your shares, although the amount of influence
Speaker 1: you can exert is based on how many shares you hold.
Speaker 1: If you hold one share and a company has millions
Speaker 1: of shares out in the market, your vote probably isn't
Speaker 1: going to make a whole lot of difference. Starboard is
Speaker 1: sometimes called an activist investor because it takes such an
Speaker 1: active role in steering the course of the companies that
Speaker 1: it invests. In The specific direction that the investors wanted
Speaker 1: to push A O L toward was in a merger
Speaker 1: with Yahoo. Starboard was similarly putting pressure on Yahoo because
Speaker 1: it had steak in Yahoo as well. Spoiler alert, by
Speaker 1: the way, those two companies AOL and Yahoo would eventually
Speaker 1: be brought together, but not through this method. At the time.
Speaker 1: Armstrong would refer to the proposed merger as quote a
Speaker 1: dead notion end quote. And then we get to and
Speaker 1: another really big change for A O L. Armstrong had
Speaker 1: been leading the company since two thousand nine. His leadership
Speaker 1: was marked by both success in the form of guiding
Speaker 1: a o L too year over year revenue gains and
Speaker 1: some failures like the mess with Patch, but overall a
Speaker 1: O L was in much better shape as a standalone
Speaker 1: company adapting to the realities of a broadband connected Internet
Speaker 1: than it had been when it was under the umbrella
Speaker 1: of Time Warner. In two thousand fifteen, another company would
Speaker 1: step up to change things, and that company was Verizon.
Speaker 1: Verizon is a telecommunications conglomerate that traces its history back
Speaker 1: to A T and T. In the eighties, the United
Speaker 1: States Justice Department ordered A T and T to break
Speaker 1: up the system of companies that had been under the
Speaker 1: Bell system. It's named after the Bell Telephone Company, and
Speaker 1: ultimately it's named after Alexander Graham Bell. A T and
Speaker 1: T was originally one of the companies under the American
Speaker 1: Bell Telephone Company, but then A T and T would
Speaker 1: go on to acquire the assets of its parent company
Speaker 1: and become the new parent company back in eight By
Speaker 1: the nineteen eighties, the U. S Government had determined that
Speaker 1: the Bell system was a monopoly and ordered A T
Speaker 1: and T to break up the system so that there
Speaker 1: would be multiple competing companies operating the telephone service Bell
Speaker 1: Atlantic was one of the is that was broken up
Speaker 1: in this process. Bell Atlantic itself consists of four smaller
Speaker 1: telephone companies, or it did at the time, and eventually
Speaker 1: Bell Atlantic would become Verizon in two thousand. That was
Speaker 1: when Bell Atlantic merged with another telecommunications company called GTE Corporation,
Speaker 1: and thus Verizon was born. Verizon acquired A o L
Speaker 1: for four point four billion dollars in cash, a huge
Speaker 1: amount of money, but a pittance compared to the hundred
Speaker 1: sixty billion dollar deal that had taken place between A
Speaker 1: O L and Time Warner. Analysts said that Verizon's motivation
Speaker 1: was likely fueled by a slowing mobile market. At the
Speaker 1: time of the acquisition, Verizon was sitting at number fifteen
Speaker 1: on the Fortune five D list. Today it's down to sixteen.
Speaker 1: Still still not bad, but success depended heavily on growing
Speaker 1: the mobile market, and as more people by mobile phones,
Speaker 1: the demand was was decreasing, right there fewer people who
Speaker 1: don't have a mobile phone. Grabbing a O L, which
Speaker 1: was making real progress in online advertising must have looked
Speaker 1: like a pretty sweet deal. But we've seen that before
Speaker 1: in this series, haven't we. Where companies have thought, oh,
Speaker 1: we'll just get this other company that's already got its
Speaker 1: hand in in this industry, and then we can just profit.
Speaker 1: So what actually happened, Well, I'll tell you, but first
Speaker 1: let's take another quick break to thank our sponsor. Tim
Speaker 1: Armstrong stayed in the driver's seat at A O L.
Speaker 1: Upon the Verizon acquisition. The company continued to focus on
Speaker 1: ad revenues, and it also launched a news service called One.
Speaker 1: One represented a unification of a O L's various ad products,
Speaker 1: including the ones the company had acquired by buying other companies,
Speaker 1: kind of making a central, one stop shop for advertisers.
Speaker 1: According to a tech Crunch p on the product, the
Speaker 1: idea was that advertisers could use that tool to optimize
Speaker 1: campaigns across all of a O L's capabilities, which would
Speaker 1: include television, video, web based ads. So you would come
Speaker 1: up to A O L and say, I want to
Speaker 1: run an advertising campaign about this product. Here's my budget.
Speaker 1: How can we make the best use of this so
Speaker 1: that we reached the most people. While searching for stories
Speaker 1: about A O l that were centered around this particular
Speaker 1: time of its history, one thing that jumped out at
Speaker 1: me was how many media outlets posted surprise takes on
Speaker 1: the fact that in two thousand fifteen, a o L
Speaker 1: still had two point one million customers using dial up service.
Speaker 1: You know, i'd said back in two thousand seven that
Speaker 1: was still having you know, millions of people. Two thousand fifteen,
Speaker 1: still two point one million people using dial up. Now,
Speaker 1: the surprise that the media reacted with strikes me as
Speaker 1: a little elitist. Actually, it strikes me as a lot elitist,
Speaker 1: because it can be very easy for people like me,
Speaker 1: someone who lives in a large city, or at least
Speaker 1: a decent sized city, to forget that broadband penetration isn't
Speaker 1: uniform throughout the United States. There's still some areas that
Speaker 1: have very limited broadband support. And then not everyone is
Speaker 1: using the internet to watch episodes of Stranger Things or
Speaker 1: download the latest Red Dead Redemption game. Some people, uh,
Speaker 1: maybe they're older, and maybe they have less experience with technology.
Speaker 1: A o L represents something they're comfortable using, they know
Speaker 1: how it works. They're not ready to move over to
Speaker 1: something else. So it's no surprise that there's still customers there. Uh,
Speaker 1: that there are two million, Maybe that's surprising, but that
Speaker 1: was the case at least in two thousand fifteen. The
Speaker 1: last time I saw a report on this was dated
Speaker 1: two thousand seventeen and the number had not changed. It's
Speaker 1: still it's still said two point one million subscribers. So
Speaker 1: I don't know if that those two thousand seventeen reports
Speaker 1: were based on the exact same information that just hadn't
Speaker 1: been updated. In two thousand sixteen, Verizon announced that it
Speaker 1: intended to acquire Yahoo, more specifically Yahoo's Internet assets, because
Speaker 1: the company is another big, big company, and some of
Speaker 1: Yahoo was tied up in investments with Ali Baba. That
Speaker 1: part of Yahoo would be renamed out Baba, so that
Speaker 1: part would not be picked up by Verizon. Verizon would
Speaker 1: just pick up the Internet part of Yah Who's business.
Speaker 1: So now that desire to bring a O L and
Speaker 1: Yahoo together could finally come true. It wasn't through a
Speaker 1: merger directly between AOL and Yahoo. It was from a
Speaker 1: third company buying both of those properties. Now, the deal
Speaker 1: was for four point four eight billion dollars to buy Yahoo.
Speaker 1: It was not a smooth process. Yeah Who was a
Speaker 1: troubled company. It had been struggling to remain relevant over
Speaker 1: the past several years, and just months after Verizon and
Speaker 1: Yahoo had announced this upcoming deal, this this planned acquisition,
Speaker 1: Yahoo revealed that it had been the target of hackers
Speaker 1: and that a serious data breach, I'm talking one of
Speaker 1: the biggest data breaches of all time had taken place,
Speaker 1: affecting potentially five hundred million people half a billion people.
Speaker 1: The deal somehow stayed in place even in the wake
Speaker 1: of that announcement. It did get marked down because originally
Speaker 1: the deal was for four point eight billion dollars. They
Speaker 1: marked off about three fifty million dollars off of it
Speaker 1: upon the completion of the deal. A year later, Marissa Meyer,
Speaker 1: who was the CEO of Yahoo she had come over
Speaker 1: from Google, resigned. Tim Armstrong would head up this combined
Speaker 1: company of A O L and Yahoo. Tim Armstrong would
Speaker 1: head up the combined company of A O L and Yahoo,
Speaker 1: and that combined company got a new name. It was
Speaker 1: called and still is both O A T. H, a
Speaker 1: name that a lot of people met with Ye Anyway.
Speaker 1: The deal would also mean layoffs, frequently that does happen
Speaker 1: with mergers. The Washington Post reported that two thousand former
Speaker 1: Yahoo or A O L employees would lose their jobs
Speaker 1: as these two businesses merged, and the various departments were reorganized,
Speaker 1: and while the Yahoo acquisition was slowly developing, before it
Speaker 1: had become finalized, a o L was still buying stuff
Speaker 1: in the company purchased a content company called Riot r
Speaker 1: y O T. That's a company that makes specialty films
Speaker 1: and documentaries for formats like VR or three D sixty
Speaker 1: degree film, and Tim Armstrong would hire a guy named
Speaker 1: k Guru gol Roppin as the chief operating officer of
Speaker 1: OATH He had been a global managing director with Ali Baba,
Speaker 1: and while Armstrong didn't know it, he had also just
Speaker 1: hired his own replacement. According to various news stories, Armstrong
Speaker 1: had wanted to convince Verizon to spin off OATH as
Speaker 1: its own independent company, sort of the same way that
Speaker 1: Time Warner had spun off A o L a decade earlier.
Speaker 1: Then Armstrong would be heading up a really big content
Speaker 1: and advertising company with powerful assets, free to pursue its
Speaker 1: own businesses, not tied down to Verizon. But Verizon's leadership
Speaker 1: never really saw eye to eye on that vision. Lowell McAdams,
Speaker 1: who was the CEO of Verizon, announced in June of
Speaker 1: that he was going to step down. He led the
Speaker 1: company precisely for seven years. He stepped down on his
Speaker 1: seventh anniversary of taking the CEO position over at Verizon,
Speaker 1: so he steps down. His replacement was the guy who
Speaker 1: had been the ct O of Verizon, Hans Vestberg. Hans
Speaker 1: Vestberg had previously been the CEO of Ericsson. Well after
Speaker 1: the transition, Vestberg decides to reorganize Oath, and Armstrong saw
Speaker 1: much of his responsibilities stripped away and handed over to
Speaker 1: Go Roppin. And so in September two eighteen, Armstrong announces
Speaker 1: he's resigning from Oath and Go Robin then took the
Speaker 1: helm of Oath. He becomes the new CEO of the company.
Speaker 1: Thus Armstrong had hired his own replacement. Now the day
Speaker 1: that I record this, which is in December two eighteen,
Speaker 1: Oath is in the news again. Verizon filed papers with
Speaker 1: the Security Exchange Commission the SEC. Two. This is something
Speaker 1: that all publicly traded companies have to do. They have
Speaker 1: to file paperwork with the SEC to let them know
Speaker 1: about things like how much money they make. It's a
Speaker 1: transparency thing. So in this filing, the Verizon has written
Speaker 1: off four point six billion dollars pre tax, and that
Speaker 1: right off is the result of Verizon buying Yahoo and
Speaker 1: A A O L. And then realizing that apparently these
Speaker 1: companies are actually worth less than what Verizon had paid
Speaker 1: for them. Essentially, they overpaid for those companies and they
Speaker 1: need to write off four point six billion dollars because
Speaker 1: of the the shortfall here. So once again we get
Speaker 1: this very familiar story. One it seems like history really
Speaker 1: is repeating itself. Vesperg doesn't seem terribly interested in the
Speaker 1: media side of Verizon's business, and by that I mean Oath,
Speaker 1: So right now it looks a little grim in the
Speaker 1: short term for people who work at Oath. Verizon is
Speaker 1: offering up a voluntary separation pro Graham. That's a nice
Speaker 1: way of saying, we need we need some of you
Speaker 1: guys to leave. We need a lot of you guys
Speaker 1: to leave, and we're offering up a package. If you
Speaker 1: take this package, you're gonna get some compensation, You're gonna
Speaker 1: get some severance pay uh, And we don't have to
Speaker 1: have the pain of going through a list and deciding
Speaker 1: who we're going to lay off. So this is to
Speaker 1: try and take as many of those people out of
Speaker 1: the decision making process of who do lay off as possible.
Speaker 1: But if they don't meet the goal for the number
Speaker 1: of people who depart, they will start laying off employees.
Speaker 1: The estimate right now is that the company expects to
Speaker 1: shed ten thousand, four hundred employees total. This is all
Speaker 1: a Verizon, not necessarily just from Oath. By June two
Speaker 1: thousand nineteen. As for OATH specifically and that filing, Verizon
Speaker 1: said that the company quote has experienced increased competitive and
Speaker 1: market pressures throughout two thousand eighteen that have resulted in
Speaker 1: lower than expected revenues and earnings. These pressures are expected
Speaker 1: to continue and have resulted in a loss of market
Speaker 1: positioning to our competitors in the digital advertising business end quote.
Speaker 1: So in other words, what it's sort of saying is, Hey,
Speaker 1: those guys who are in charge earlier, you know, not us,
Speaker 1: but those other guys who used to lead the company.
Speaker 1: They thought we were going to do way better than
Speaker 1: what we actually are doing right now. But they weren't
Speaker 1: able to anticipate the market conditions or how well our
Speaker 1: competitors were going to do. But we, you know, the
Speaker 1: new guys who are in charge now we have to
Speaker 1: deal with the mess that they left, and we also
Speaker 1: understand it's going to be really tough over the next
Speaker 1: few years. That's essentially what their filing says. And it's
Speaker 1: a warning this that says, don't expect us to turn
Speaker 1: this around overnight. So what is going to happen next
Speaker 1: for oaths, or specifically to a o L. That's something
Speaker 1: of an open question as I record this episode, and
Speaker 1: maybe by the time you hear it it will have
Speaker 1: been answered it. Maybe that Verizon will decide to spin
Speaker 1: off the company after all, because Vestberg doesn't really seem
Speaker 1: all that interested in developing a media company. It's not
Speaker 1: likely to go away because the company still does generate revenue.
Speaker 1: It's not like it's hemorrhaging money left and right. It's
Speaker 1: just not the transformative property that Verizon was hoping it
Speaker 1: would be when it made the acquisition, which again, I
Speaker 1: think you could argue convincingly would be the full history
Speaker 1: of a o L. Baron's, by the way, has an
Speaker 1: article that cites Wells Fargo analyst Jennifer Fritzscha and she
Speaker 1: wrote that quote, the hype of OATH has been over
Speaker 1: for some time. While we believed in the white board
Speaker 1: concept of OATH offering a new digital advertiser of choice,
Speaker 1: beyond Google and Facebook. We think this has been an
Speaker 1: uphell fight for Verizon without a significant amount of gale
Speaker 1: and content ownership end quote. And that's the story of
Speaker 1: a o L so far, from a startup in the
Speaker 1: nineteen eighties that provided a bulletin board like service to
Speaker 1: Commodore sixty four users all the way up to a
Speaker 1: cog in an enormous multibillion dollar global corporate machine that's
Speaker 1: giving off a little smoke at the moment. The upcoming
Speaker 1: departures and layoffs will likely mean things will continue to
Speaker 1: change for folks over at a o L. But hopefully
Speaker 1: those who are working in the content side will continue
Speaker 1: to have gainful employment. As someone who creates stuff for
Speaker 1: the internet, podcasts, the occasional article. I feel a lot
Speaker 1: of empathy for people who work at other companies that
Speaker 1: go through these big changes. I've gone through changes like
Speaker 1: that multiple times myself. I've been very fortunate so far,
Speaker 1: but you can't take that for granted. Those things can
Speaker 1: really shake things up, and it's it's a huge impact
Speaker 1: on the lives of old people. So I hope it
Speaker 1: turns out for the best for everybody concern. That is
Speaker 1: the conclusion of the a o L story so far,
Speaker 1: America Online probably has several years left in its history.
Speaker 1: I sure hope it does. I hope it doesn't just
Speaker 1: go away, so I'll probably have to do an update
Speaker 1: a follow up episode at some point in the future.
Speaker 1: But this was a really fascinating story to look into,
Speaker 1: very complicated from a business perspective, but interesting and and
Speaker 1: connected to so many other companies, whether directly through mergers
Speaker 1: and acquisitions or through competition. If you guys have any
Speaker 1: suggestions for future episodes of tech Stuff, maybe it's a technology,
Speaker 1: maybe it's another company story you would like to hear about.
Speaker 1: Maybe there's someone I should interview. Why not let me
Speaker 1: know send me an email. The email address for the
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